America’s Health Insurance Plans (AHIP) released its latest survey of HSA enrollment on May 4. It finds that in just 14 months, more than one million people have enrolled in HSA-qualified high-deductible plans. The enrollment breaks down to 556,000 in the individual market, 147,000 in small group, 162,000 in large group, and the rest uncategorized or unknown.
Importantly, 37 percent of the individual enrollment was for people who were previously uninsured, as was 27 percent of the small group enrollment. Unfortunately, this is a count of High Deductible Health Plans, not HSAs. Many employers are not funding the HSA, leaving that to the employee.
This is a mistake. The time to activate the account is at the time of enrollment, when people are thinking about it. Even if the employer put just $100 in the account to get it started, it would fast-track the process and increase the sense of ownership.
Hospitals Waking Up
The hospital industry is beginning to wake up to the potential of consumer-driven health care. The American Hospital Association (AHA) and Federation of American Hospitals (FAH) jointly conducted a survey of health plans to find out what’s going on. They found “a diverse mix of products filling the fast-growing market.”
They also found, “[f]our out of five insurers surveyed believe consumer-driven products will dramatically change the nature of the health insurance industry.” Despite that prospect for dramatic change, the hospitals seem reassured that “95 percent of HSA and HRA enrollees are in plans built on the insurance company’s existing provider network and negotiated rates.”
(Darned if I understand why the hospitals find that comforting. Providing “deep discounts” to health plans is nothing but trouble for the facilities.)
The survey also found 60 percent of the plans provide comparative cost information and half “express cost in exact dollars, while 36 percent express cost as a range of dollars.” And it found about half of the HRA and HSA plans publish quality information.
The press release reports HSAs and HRAs have doubled their share of premium dollars in the past year, and 70 percent of employers are expected to offer the plans by next year.
HSAs May Be “Benefit Star” This Year
Employee Benefit News reports HSAs may be a “benefits star” this year. It says HSAs are lagging a couple of years behind HRAs in market penetration, but notes some employers are using the HRA as a way to transition to a more consumer-friendly HSA. It cites a Mercer study that reports many employers who offered only an HRA in 2004 will either convert to an HSA (7 percent of these firms) or offer both approaches (28 percent) next year.
Mercer also reports larger employers are more likely than smaller ones to offer some version of consumer-driven health, though Larry Akey of AHIP says the opposite is true for HSAs, with smaller employers better able to make a quick transition.
The question of long-term savings is still open, but Steven Parente of the University of Minnesota is closely tracking the experience. So far, he says, whether consumer-driven health saves money depends on the design of the program. He has studied one large employer with a pretty rich package whose employees saved on prescription drugs but not on hospital expenses, but “we have other results that we are still working on that show HRAs can lower cost.”
Parente does not yet have information on HSA experience, but expects that by 2007 there will be enough data to know whether consumer-driven health plans are cost-effective.
Source: April 1, 2005, Employee Benefit News, http://www.benefitnews.com
Banks Looking at New Market
Keeping up with the competition is no longer a matter of worrying about what other health plans may be doing. In a consumer-driven world, the relevant industry is no longer health insurance, but health care financing. All the more reason, then, to watch what the financial services organizations are doing.
One interesting development is a collaboration between PricewaterhouseCoopers (PWC) and the Medical Banking Project (MBP). The two organizations are developing an HSA Workgroup “to assess and/or develop best practices for administering deductibles and also to recommend safeguards that protect health care providers from excessive write-offs,” according to an April news release by the MBP.
PWC’s Dave Harris, leader of the effort, is quoted as saying, “Consumers will judge HSA and high-deductible health plan combinations by how convenient they are to use, including managing deposits, withdrawals, payments, and reimbursement of qualified medical expenses.”
The release goes on to say, “One objective of the HSA Workgroup is to develop the necessary groundwork that will enable patients to have the ability to one day walk up to an ATM-style kiosk at a hospital, swipe their insurance ID with debit card functionality, and never have to worry about complex paperwork commonly associated with HDHPs.”
PWC’s Peter Savalli adds, “HSAs provide opportunities for banks and other financial service institutions to expand services into a relatively new market. The discipline and technology used by banks to process financial transactions can decrease time and costs in today’s environment.”
HSA Investment Options Grow Kiplinger’s Personal Finance Magazine also has several examples of families who have successfully navigated the new world of HSAs. One is a Tallahassee, Florida family who signed up for a Golden Rule HSA with a $5,250 deductible and is saving more than $7,000 per year in premiums. Their premiums dropped from $900/month to $312/month. They put $4,700 into their HSA last year and will contribute $5,000 this year.
The article notes HSA administrators, faced with rising account balances, are beginning to make better long-term investment options available. It cites the experience of several companies, including Health Savings Administrators, which offers 15 Vanguard funds; First HSA, which “offers a range of funds and individual stocks”; and Mellon Financial, which has Dreyfus fund options. Other companies mentioned include JP Morgan Chase, Wells Fargo, and Fidelity.
Fresh Thinking from Banks
A similar theme is struck by William Short of UMB Bank in Kansas City. He writes in an article in the Kansas City Business Journal, “As financial institutions enter a market dominated by insurance companies, we can expect their fresh perspective to have significant impact on consumer-directed health care.”
Short adds, “What makes the HSA so special is that it brings the banking industry into the medical/health insurance arena. Banking core competencies revolve around payment processing, and there is not an industry in more need of efficient payment processing than the health insurance business.”
He also notes, “With the introduction of point-of-sale payment, overhead costs can be lowered, and an end to long lags between service provision and compensation will be at hand.”
Greg Scandlen ([email protected]) is assistant editor of Health Care News.